Cash shortage 'to bring SME closures'

Petchanet Pratruangkrai
The Nation May 16, 2014 1:00 am

The prolonged political unrest in the Kingdom has hit the cash flow of 30-40 per cent of small and medium-sized enterprises and will lead to business closures in the near future, warned the University of the Thai Chamber of Commerce.

Aat Pisanwanich, director of the UTCC's Centre for International Trade Studies (CITS), said that as there were no positive signs for an early solution to the crisis, more SMEs would close down because of a loss of trading opportunities to rivals.

The political mess has already hit consumer-spending sentiment, Aat said.

"Because of the slowing economy, SMEs that have low cash flow will be the first to be affected, and about 30-40 per cent, or 700,000 SMEs from a total of 2 million in Thailand, will be hit hard," he said.

In another blow, a CITS study indicated that exports of five products - rice, palm oil, garments, wood and electrical appliances - would continue to lose their market share under the Asean + 3 liberalisation. Aat said those industries would lose out because other Asean countries, mainly Malaysia and Indonesia, have a better competitive edge in China, Japan and South Korea, the "plus three" countries.

Vietnam, Myanmar and Cambodia are also more competitive than Thailand in those industries, he said, adding that the combined loss could reach Bt250 billion this year.

Aat said many Thai industries had a reduced competitive edge because of the country's internal conflict. Rice export, particularly to China, had been hit hardest and Vietnam and Cambodia had improved market shares for export to China over the past six years.

Before the Asean + 3 implementation, Thailand had a 96.5-per-cent share of China's rice-import market. But by last year, its market share had dropped to 35 per cent, while Vietnam's had increased from 3.5 per cent six years ago to 64 per cent. Cambodia had a 1-per-cent share, up from zero.

For palm oil, Aat said Thailand had also lost market share in China to Indonesia and Malaysia, while Vietnam now had a better market share for garment exports to China after Thailand's dropped from 24.9 per cent in 2008 to 13.3 per cent in 2013.

Vietnam's share of China's garment-import market improved from 30 per cent to 42 per cent during the same period.

Thailand's share of the Chinese market for imported electrical appliances decreased from 22.3 per cent to 18 per cent in the period, while Malaysia's share had gone from 34.4 per cent to 42.7 per cent.